Terror deals heavy blow to struggling Postal Service

Washington  The U.S. Postal Service is reeling from the effects of the Sept. 11 terrorist attacks and the ongoing anthrax scare, and analysts say eroding confidence in the mail service threatens the financial viability of one of the nation's most venerable institutions.

Mail volume was down 5 percent in September over the same period last year. Revenue in the first three weeks after the attacks was as much as $500 million below forecast. Costs associated with damage to a post office near the World Trade Center are at $63 million and mounting.

Postal Service officials express faith that the institution will recover, but others say the government-created monopoly is spending money it can ill-afford to increase security, combat the anthrax threat and ensure safe and timely mail delivery. No one knows how much the fear of anthrax-tainted mail will lead to further declines in volume.

"It's unprecedented," Postal Rate Commission analyst Robert Cohen said. "This was a direct attack using the mail as a weapon. It is making everybody rethink the role of the Postal Service. The rate payer will wind up paying a lot more money for this. What's likely to happen is the debt will keep growing and growing, and, ultimately, it could be up to Congress to bail them out."

Even before Sept. 11, the Postal Service was expecting a $1.65 billion deficit for fiscal 2001. It had announced it would seek its third rate hike in less than a year. It had cut 21,000 positions. It was $11 billion in debt, fast approaching the $15 billion ceiling set by Congress. It froze most capital projects. Its premier product, Priority Mail, was declining after years of exponential growth.

Postmaster Gen. John Potter acknowledged costs will rise as a result of the additional security needs. "But when it comes to the safety of our employees, money is not the object," he said.

Though Potter said volume appears to be returning, the trend for the past two years has shown a net decrease in first-class, single-piece mail the class of mail that pays much of the freight for the Postal Service.

With the Federal Aviation Administration grounding planes for two days and then imposing restrictions on mail that can travel on commercial jets only first-class mail under 16 ounces the Postal Service has accelerated an effort to transport more mail by truck. That will slow delivery to some extent, and some fear that it will lead to reduced reliance on mail.

Already, at least one newspaper the Arizona Daily Star has told readers it will no longer accept "snail mail." Instead, readers were asked to use e-mail or faxes.

Military Postal Service Agency officials have recommended the cancellation of the popular "Operation Dear Abby" that encourages holiday greetings to service members overseas.

Postal clerks and letter carriers across the country are nervous, union leaders say. They are trying to strike a balance between protecting themselves using latex gloves and reassuring the public.

"It's bad, and it's going to be worse," said Gene Del Polito, president of the Association for Postal Commerce. "Certain catalogue sales are down by 20 to 25 percent, and there's general anxiety about the anthrax threat. Between the two of them and the continuing downturn in the economy, it will press the Postal Service's resources to their absolute limit."